November 2008 Archive for John Block Reports from Washington

We find our country in an unbelievable economic quagmire. How can we get out of this mess? Maybe the place to start would be to ask – what did we do to get into it in the first place?

We have been on a spending binge. That’s right. Spend, spend, spend. Borrow. Pile up the debt. Families buy too much stuff. We have not limited ourselves to what we need. We buy to satisfy every little whim. Put it on the credit card. We’re not saving. We haven’t found it necessary to discipline ourselves. This excessive behavior by individuals has been carried to an extreme by our government. Years ago, Illinois Senator Everett Dirksen said something to the effect – “A billion here, a billion there and pretty soon we’re talking about real money.” Now we’re talking about trillions. That is real money.

The irony of this whole miserable situation is that the reckless behavior that got us into this mess is what we say now we must do to get out of the mess. Yes – we need to spend. We must have a big stimulus package. We must bail out the auto industry with billions of dollars – which, I might add, is throwing good money after bad. Consumers should start spending again. Buy something. Anything, whether you need it or not.

When we get through this, we need a more conservative balance of spending and borrowing. We want our economy to keep growing. We need to get our jobs back, and balance the federal budget. The adjustments that we face are going to be painful.
The Ag industry is feeling the pinch like everyone else. Farming has always been a boom and bust business. But this year is one for the books. Seven dollar corn, down to three dollars in four months. The hog business that was supposed to be improved by this fall is worse. The cost of growing next year’s crop has gone out of sight. With the global economy in the tank, we worry about our export market.

Fortunately, the Ag industry has a strong balance sheet – not like the auto industry. We’ll be fine. It is just hard to visualize the correct path back to reasonable stability and prosperity.

Today, just an extra word about Wal-Mart. This weekend, I picked up the newspaper. The 30 biggest companies on the Dow Jones were listed, and every company’s stock value has declined this year – some by a huge amount, except Wal-Mart. Up 14%. The explanation is simple. Wal-Mart is well-managed and is providing real value to their customers. Congratulations!!

And now for today’s commentary.

The big question in the country is – “What will an Obama Presidency mean for agriculture?” Some are excited and hopeful. Others are apprehensive and unsure.

If he governs from the center and resists the pull to the left by many in his party, it should be OK. I talked with Charlie Stenholm, former Congressman from Texas. He is a farmer and highly regarded in farm country. He says the moderate “Blue Dog” democrats will keep Obama in the middle.

Marshall Matz, who co-chaired Obama’s farm and ranch team, said “There will be no losers in agriculture under an Obama Administration.”

Charlie and Marshall are both on the short list for Secretary of Agriculture. I respect their confidence and judgment. Still – I think there are some things that we should keep an eye on.

Obama has been solid behind ethanol. He voted for the farm bill. That should give us some confidence. However, will Barack Obama be able to push the environmental fringe, which is a powerful force in the Democratic Party, to accept offshore drilling, to build nuclear power plants, and refineries? I’m not sure Obama is tough enough to get this done even though the vast majority of the people support it. These low energy prices are not going to last. Charlie Stenholm says, “We need energy from every available source.” I agree.

Trade also is something to worry about. The Democratic leadership in the Congress has blocked a vote on the Colombian and South Korean trade agreements. Obama at one time said the North American Free Trade Agreement needed to be renegotiated. For those of us in agriculture, trade is vital. We export 25 percent of what we produce. Keep the trade channels open.

Federal government regulation is another concern. Property rights, EPA dictates, are things that can keep us up at night.

Finally, taxes – Obama is committed to support an increase in capital gains tax, dividends, and the death tax. Not good news for some farmers.

We’ll see where the new leadership team takes us. Dealing with the crippled economy is Challenge No. 1 right now.

With this election behind us and the global economic crisis as background, I have to ask, did we really learn anything? Is it going to be more of the same? Spend, spend, spend and watch the debt pile up.

What did we hear during the marathon campaign? House, Senate, and Presidential candidates all sang from the same song book. “Don’t worry, Joe the plumber. I’ll cut your taxes.” “Ninety-five percent of you will get a tax cut. I’ll get the money from that rich 5%.” “Affordable health care is on the way.”

You see, by promising to give away money, candidates are able to buy votes, but we can’t afford it. We are living beyond our means now. The government can’t and individuals can’t. Look at the soaring government debt. Credit card debt is also a serious threat to our stability.

Maybe the candidates should have told us to “suck it up.” “Tighten your belt.”

Well, the time has come for the politicians to tell us straight out – “We need to raise the retirement age for Social Security to 70 years with an escalation clause.” When President Roosevelt enacted Social Security, the life expectancy was 65 years. At that time, half the people didn’t even live that long. That kept the cost down. Now, we live to 78 and the cost is increasing every year. Also, we need to put a lid on the escalating cost of Medicare and Medicaid. Universal health care is going to cost far more than is projected.

Andrew Yarrow, in his book “Forgive Us Our Debts,” says that by 2030 if nothing is done to stop the runaway, automatic pilot programs, federal taxes will rise by 50%. 40% of our budget now is spent on Medicare, Medicaid, and Social Security.

This economic crisis that the world is caught in should serve as a wake-up call to all politicians. President Obama should be firm and insist on:

1. Cutting unnecessary spending.
2. Getting control of entitlement programs.
3. Other countries carrying a bigger share of the military burden.

It takes courage to look the voters in the eye and speak the truth. We tell our children sometimes “no, we can’t afford it.” That’s what the politicians should do.

Next week, I’ll talk about what President Barak Obama could mean for agriculture.